So there was word late Tuesday that the Administration is searching for a work-around to the problem of state reluctance to establish insurance exchanges. More on Tuesday’s news in a moment. But the news set us to wondering, “Why does the healthcare reform law require every state to establish an exchange anyway? If we’re going to have an exchange, wouldn’t a single, federal exchange make more sense?”
Under the healthcare reform law, every state is tasked with establishing an insurance exchange—a sort of online purchasing portal for individual and small group (and later, large group) health insurance. States are given freedom to design their respective exchanges, within broad parameters set by the healthcare reform law and its regulatory coattails. If a state fails to act (or acts too slowly) the federal government is permitted to operate an exchange for the state’s citizenry.
Despite millions of taxpayer dollars doled out to states to help them jumpstart their exchanges, it appears the exchange-creation train has barely left the station. There are at best nascent efforts underway in most states. As my colleague Mark Holloway pointed out in our webcast of Tuesday afternoon, only about a dozen states have yet enacted “exchange-enabling” legislation, and the legislatures in many states have now adjourned for the year. Some won’t be back in session in time to get the process rolling in time. The federal government has set early 2013 as the deadline for states to demonstrate adequate progress on their respective exchanges, to avoid federal intervention.
It turns out, however, that the healthcare reform law did not budget adequate cash to fund a federal exchange, meaning that if the Department of Health and Human Services is going to establish a federal exchange, it’s going to have to squeeze funds out of other programs, and apply them to its exchange-creation effort.
More and more it looks like the operational status of the state-based exchanges may be deferred into the back half of the decade. It stands to reason that if that happens, the individual mandate (assuming it survives the current legal challenges to its constitutionality) will have to be postponed. Perhaps even the employer play-or-pay mandate as well.
Whatever one thinks of the insurance exchange concept generally, the concept of 50 state-based exchanges is a little baffling to us. It is akin to re-inventing the wheel 50 times over, simultaneously, at taxpayer expense. We understand notions of federalism and states’ rights, and we know there is long-standing federal law that largely reserves to the states the right to regulate insurance. And it’s true that views may differ from state to state, regarding what form of exchange might best suit the state’s citizenry.
But still. If we’re going to have exchanges, wouldn’t a single, national exchange make more sense than 50 state-based exchanges? Wouldn’t one door, through which insurers had to present qualifying credentials, be preferable to 50? The exchanges will rely heavily on access to federal tax return information, and on reports filed by employers regarding the cost and availability of employment-based insurance. Wouldn’t it be easier to connect all that data with one exchange portal, rather than 50?
When an employer with employees in multiple states decides to let its employees shop for their own insurance, in an exchange, wouldn’t it be better—for consistency’s sake—if these employees were shopping in the same store, comparing the same products, and applying for coverage through a consistent process? Would it not be easier for the employer to provide assistance, if this were the case? Seems to us like it would.
Tuesday’s announcement was interesting. The Administration is apparently laboring to find a work-around to the problem of states not passing exchange-enabling legislation. The notion floated Tuesday was that perhaps officials from these recalcitrant states could help operate the fed’s version of the state’s exchange, as a sort of joint venture, and that perhaps this could be done without any authority from the state legislature. HHS has apparently suggested that after a couple years under a federally-established state exchange, a state might be granted the reins to carry on the exchange’s operations.
That may be a pretty decent idea. If we’re going to have insurance exchanges (we don’t consider in this posting the merits of that idea, one way or another), and if a single federal exchange is objectionable to some, perhaps the next best thing for most states is a cookie-cutter, federally-created exchange that would be implemented in the states lagging behind their own exchange-building efforts, and then later turned over to the states. We assume HHS would build out an exchange prototype, and then simply deploy it in a great many states. Seems like a more efficient process to us.